​Moscow ready to offer Ukraine discount on gas contract price

Reuters / Laszlo Balogh
Moscow insists that besides a possible discount, the gas price formula and the existing contract with Ukraine should remain the same until the standing contract’s expiration. Russia, Ukraine and the EU Commission agreed on a new round of talks next month.

“The Russian side believes that the current contract and the price formula should not be subject to change until the expiration,” Energy Minister Alexander Novak said Friday after tripartite gas talks in Brussels. “The existing contract envisions the possibility of discounts, and the sides use this possibility to regulate contractual obligations,” Novak stressed, referring to a 10-year contract signed between Gazprom and Naftogaz in January 2009.

Citing a volatile gas market, Novak stressed that the signatories agreed to review the contractual gas price every quarter. “Since the price formula serves to calculate the price for a long-term period [of 9 months], the price will be reviewed on a quarterly basis,” the energy minister said.

Kiev is currently paying $329 per 1,000 cubic meters of Russian natural gas – a price with a discount, brokered by the EU Commission in October. This so-called winter package is set to expire on March 31, 2015, along with a suspension of a take-or-pay agreement that requires payment for gas no matter if Ukraine needs it by that date or not.

“From April 1, the gas price for Ukraine will be $348 per 1,000 cubic metres,” Novak said, adding that Moscow might consider a $100 discount starting second quarter of this year. Russia could offer Ukraine better terms, provided Kiev pays for gas supplied to the Donbass region, Novak said earlier. According to him, so far Ukraine has not officially appealed to Russia for any discounts.

The Ukrainian side in its turn said that Kiev does not need to make a formal request to the Russian government to provide discounts on gas. Ukraine’s Energy Minister Vladimir Demchishin however said Kiev hoped for a gas price of $250 under the so-called summer package.

Europe remains hopeful, according to EU foreign policy chief Federica Mogherini, that a deal “which may contribute to reducing the existing tensions in the energy relations” could be reached soon.

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The European Commission called the negotiations “constructive” and confirmed that further talks are expected in April. EU estimates show that Kiev would need 4-6 billion cubic meters of gas from Russia by around October to boost reserves for next winter.

“We’ve had a constructive meeting on the further action after the ‘winter package’ expires. I am pleased that the parties have agreed on further steps...I am convinced that the flow of transit gas to the EU will remain safe,” European Commission Vice President for Energy Union Maros Sefcovic said after the meeting.

Meanwhile Ukraine’s accumulated debt for previous supplies of Russian natural gas, including penalties, has grown to $2.477 billion. “As of today, Ukraine’s debt amounts to $2.477 billion, including the base debt, penalties and fines,” Novak said as cited by Sputnik.